Sticking To Our Guns

I will not waste too much of your time to start the day. I remain bearish equities from 1,126, and would use 1,117.50 as a trailing stop here. The key support below is 1,083, and we can expect a bounce there possibly, but if we don't break 1,100 rapidly I will become more concerned about my view. The fact is if the bearish scenario plays out here we should be in a wave 3 or C lower, which either way is quite impulsive. So indecisive price action would make me question the downside a bit. The one thing that can comfort bears here is the Nasdaq daily chart which has a quite bearish set-up here.

Under a bearish scenario Gold should underperform as well, so I will keep a close eye on the precious metal. This morning it is not validating the further downside indicated by S&P futures, but it has not broken to the upside yet. While I clearly think that yesterday's Fed announcement is a USD negative and should benefit Gold as a store of value against future inflation, I remain convinced that in a debt contraction environment all assets go down and we are to face another wave of contraction Gold should underperform along with stocks. This is why I think the correlation between the two will quite telling as to whether this move is for real or not.

Last but not least, AUDSUD (and the AUD in general) is a good proxy for risk and should also exhibit weakness along with stocks and Gold. We had recommended shorting 0.9185 and would observe a 0.9165 trailing stop. It will not leave much of a profit but on the downside I am playing at the very least a retest of the 0.8875 support and on a break I thnik the potential for this trade could become rather large, so it's worth handling a few speed bumps if we are to last on this ride.

exactly. but today he's "wondering" if the market drop is an intra-day buying opportunity. i was expecting to hear him telling the board emphatically that this was the buying opportunity of a lifetime, and that he was going all in with 200% margin.

The facts are that applying trend analysis to your trading is like driving looking at the rear view mirror. A bane of these people who seem to opine endlessly about the market every day are that they have no clue where the market is headed. In fact many a time they paint both bullish and bearish scenarios with no timeframe supplied for either just so they can look intelligent.

To reasonably predict the markets you need to follow the data and even then calling tops and bottoms are a fools game.

Gold could go either way - it could come under pressure as margin clerks look for assets to sell. It could also decouple to the upside as people look for a store of some of their value as fiats argue which one will fail first.

If gold went substantially up - that would be bearish on equities. Especially if physical demand overwhelmed the manipulators.

Equity downside is limited and sell offs won't be as intense as you think. No more lemmings left to scare, first of all. Secondly in the context of QE with more expected to come, equities will appreciate. EVEN if the economy tanks. That's what I been saying. That's what happens when the world is awash in ridiculous liquidity. The economy is now in total ZOmbie mode (not just for banks anymore, folks): responding to doses of stim then collapsing without it as the US productive sector has been reduced to a nubbin. Feel vulnerable? Don't worry. Our chief weapon ain't nukes anymore. We just exported the Double Whammy Economy to China! (Economy cooling, CPI at 3%!)

You don't think the robots might be super-fast lemmings when the time comes?

I have no idea. I still want to think that those robots are meant to make money, but by pushing the market ever higher as real people get out, it looks more like they are setting themselves up to be the "greatest fool". Normally, you want to buy low, then ramp the market up and get the suckers in there. But they are ramping it, and driving the suckers out. It's too weird.

Oh please, QE2 is a complete non-event. They're only rolling over maturing MBS proceeds into Treasuries. That is about as half-assed a response to deflation as I can imagine. Here's a question for you: If nothing TPTB has tried has worked to date, why will QE2 work as planned?

There's an eerie resemblance between the last eight days of trading, and the eight days that preceded the May 6 "Flash Crash". Just an observation. Might not hurt to put in a GTD limit buy order for Prudential at $0.01, though.... just a thought, wondering if something like that could actually execute.

If it is true, as it appears to be, that a huge fraction of the volume in the market is generated by ALGO robots, then how do we explain what happened yesterday? Were the robots reading the news wires? Now, I'm a big fan of the posts that show the "crop circle" phenomenon, and it's obvious that some fairly blatant stuff is going on; yet how do we reconcile that with the bigger overall picture where news reports DO move the market? I would have thought anyone that wasn't a computer was sitting aside just watching; yet the way the market moves seems to put lie to that idea. Basically, now I'm REALLY sort of confused.

The computers have been trained to read press reports, and to pick key words out of them, and then trade based off of that information. So yes the Algos do read the news.

There are many computers that read 10-K's and other company reports and press releases, they can scan them and get a sense of if the news is good or bad based on how many times the words "better than expected" or "worse than forecast" are present, and then hit the bid or lift the offer accordingly. All 100x faster than you could even click on the headline on your Bberg terminal.

The difficulty with gold is that physical gold is higher in price than paper gold. I do not have any ratios or ratio variations. I don’t think that a paper gold sell off will impact the physical market with the same proportions. The gold holder is a skeptic and wary of manipulators. I will buy a little with any 20% or so drops in physical price. Although gold may decrease in terms of fiat currencies, will it hold better buying power than the currency basket?

You're going to want to treat it differently based on whether you're trading gold, or buying disaster insurance. The way it looks to me right now is that there's enough paper gold being traded that it ( the tail ) is wagging the price of physical ( the dog ); as long as the demand for physical is low enough not to break the futures market, the paper gold will continue to do this. However, major bullion houses, being not stupid, will adjust the premiums they charge, so what is likely to happen ( IMHO ) in a decoupling event is that the "price" of gold could drop hugely, but the premiums for physical would jump. In other words, the price of gold might go to a dollar, but you couldn't afford to buy it at that price.

I see it as disaster insurance, not to be sold during a crisis, but to come out on the other side with the purchasing power relatively intact. I don't see it as a trading vehicle, personally, though I know a lot of people do.

I remember that when all this started, I ordered some physical, and it took just at three months to get it. When SHTF, you can forget about buying and getting physical, no matter WHAT the price is.

Was at a JPM bank yesterday taking care of some business and the new "Financial Adviser" asked me if I was interested in investing in the market. I said, "you mean the big ponzi?" She almost fainted right in the middle of the bank. Then I told her I trade, don't invest.